Georgia Senators Discouraged Sanctions on Suspicious Chinese Imports

Georgia's two senators intervened on behalf of an Atlanta-area wholesaler last year to discourage trade sanctions against cheap Chinese paper imports as the Bush administration investigated complaints that the paper was illegally subsidized by Beijing.

The pro-import stance put Sens. Saxby Chambliss and Johnny Isakson at odds with other U.S. lawmakers who said illegal Chinese "dumping" threatened to shutter manufacturing plants in their states. It also conflicted with the "Made in the USA" trade position Chambliss and Isakson have taken in other disputes.

The two Republicans, for example, urged President Bush in January to crack down on Canadian lumber imports that they said were illegally undercutting U.S logging, particularly in the Southeast.

In the paper dispute, they struck a different tone.

"We understand that you are under political pressure to 'get tough' on China, but we also know that you are required by law to make objective decisions in this case based on the facts," they wrote in an October letter to Commerce Secretary Carlos Gutierrez.

Chambliss and Isakson say they were simply helping a Georgia-based company — Unisource Worldwide Inc. — maintain a steady and affordable merchandise supply. But critics say such backyard advocacy is one reason U.S. manufacturing is heading overseas.

"Our nation's manufacturers and their employees can compete against the best in the world, but they cannot compete against nations that provide huge subsidies," Sen. Susan Collins, a Maine Republican, said at a U.S. International Trade Commission hearing on the paper case.

She said her state had lost 600 jobs in the industry over five years and that she was deeply concerned about thousands of others, because, "To put it bluntly, China cheats."

The dispute involved coated free-sheet paper — a thick, polished paper often used in high-end catalogues, magazines or textbooks.

After Chinese imports posted a tenfold increase from 2004 to 2006, U.S. producers accused Chinese companies of selling their paper at below-market prices that were impossible to match.

The Commerce Department began investigating whether the Chinese paper — as well as imports from Korea and Indonesia — benefited from unfair government subsidies such as cheap loans, grants, tax rebates or illegal logging.

Unisource, a distributor based in Norcross, Ga., imports much of its paper from China and began mobilizing against sanctions that would drive up its costs.

The company, which says it employs about 400 people in Norcross and about 4,500 nationwide, hired a lobbying firm to reach out to lawmakers and administration officials, including Isakson and Chambliss. Lobbying records show Unisource paid Washington-based Downey McGrath Group Inc. between $20,000 and $30,000 as the case was pending.

In two letters — dated February 2007 and October 2007 — Chambliss and Isakson warned Gutierrez to "proceed with caution" as he considered imposing tariffs.

"We are concerned that import duty measures would have serious adverse economic effects on Unisource and other downstream consumers," they wrote in February.

Gutierrez ultimately rejected their concerns, slapping the imports with stiff tariffs after ruling in October that the imports were getting subsidies of between 7 percent and 44 percent.

But a month later, the International Trade Commission blocked the sanctions. The commission, which focuses on market impacts, ruled that domestic producers' market share had not been sufficiently damaged to justify the punishment.

Chambliss and Isakson say there was nothing inappropriate about intervening on Unisource's behalf, even if it put them on the side of Chinese manufacturers.

"I represent my state and the companies and the consumers within the state," Isakson said in a telephone interview. "That's what the global economy is all about ... There will be products that we make in Georgia that are needed somewhere else."

They also reiterated arguments that Unisource made during the case that the company sometimes had difficulty filling orders from domestic producers.

But U.S. manufacturers said they readily met U.S. demand until the cheaper imports began undercutting them. Besides, Chambliss and Isakson could have at least allowed the dumping investigation to run its course before taking sides, the manufacturers said.

"We're not talking about being protectionist here," said Lloyd Wood, spokesman for the American Manufacturing Trade Action Committee.

"The U.S. government has an obligation to make sure that everyone else is playing by the rules," he said. "And when you have Congress trying to discourage that it's going to create a climate for investing in manufacturing in the United States that isn't going to be healthy."

Or as Chambliss himself said in May about Canadian lumber imports threatening U.S. loggers: "We must abide by our (trade) agreements, but that also means our trading partners must abide by theirs."